International Economy

• The 2000 world economy, as defined by the International Monetary Fund, grew by an estimated 4.7%. This can be attributed to strong growth in the US, robust expansion in Europe and a fragile recovery in Japan.

• The US displayed exceptional growth in the first half of 2000, followed by signs of considerable slowing in the second half. The slowdown affected business spending on capital equipment, housing starts, government spending and personal expenditures.

• The Euro area benefited from high consumer and business confidence. The euro continued its poor performance against the US dollar.

• Japan’s economy grew due to increasing corporate profits, and investment in plant and equipment, particularly in the high tech sector. Japan continued to struggle with banking and corporate restructuring.

• Higher inflation mainly due to increasing energy prices was experienced, although core inflation remained relatively low. Energy prices are expected to moderate in 2001.

• Growth for the global economy in 2001 will depend on the ability of the US to engineer a soft landing. Private forecasters estimate US economic growth of about 2.5%.